ET Now: FDI in insurance is a step in the right direction but given the political realities, it will be difficult for UPA II to table and get this bill approved.

Keki Mistry: Definitely a step in the right direction and we welcome it wholeheartedly. Whether they are able to get it through parliament or not is something we'll to wait and see. Hopefully, if they can get it through parliament, it will be a wonderful thing. It will boost sentiment, we will get in a lot of money into India because there is a lot of interest from foreign insurance companies for investing in India. So we get a lot of money which would help the rupee to strengthen. So all in all, I would say very positive.ET Now: On a ballpark basis, what is the capital requirement of the insurance industry for say the next 3 to 4 years and on that account, how imperative it is that the insurance FDI gets approved?

Keki Mistry: Capital is an ongoing requirement, capital is a function of growth. So with all the measures that the government and IRDA are taking in terms of trying to improve the product profile, faster approval of products, new products and so on so forth, one would expect that the growth will pick up substantially and as the growth picks up, the capital requirements will also start setting in. So it is difficult to envisage the value at this point of time, especially since some of the bigger companies are now mature and therefore do not really require that capital unless the growth numbers really grow very fast but the smaller companies will definitely continue to require capital. So any step where foreign ownership in insurance is increased would be welcome, whether it is through FDI, FII or whether it is just foreign ownership.

ET Now: If I am a shareholder of HDFC Limited and if I am betting on HDFC Insurance to go public, now that FDI limit in insurance has been increased, would you go slow when it comes to your IPO plans for the insurance business?

Keki Mistry: One has to read the final language of the notification, whenever it happens post the parliament approval, because if it is only FDI, then effectively what it means is that the foreign partner can bring in capital or you can raise capital through ADR or GDR route, which is also construed as FDI, as far as I know. If the language says only foreign ownership, then it is possible to do both in FDI, where the foreign partner brings in some amount of capital and if the foreign partner does not want to put in the full level of capital that they can, then it is possible to do an IPO where there is 26% or whatever reserve for foreigners. So it is a function really of how the sector opens up and the notification that comes out.ET Now: The cabinet has also okayed FDI in pension funds. How do you see the opportunity there once it gets parliamentary nod?

Keki Mistry: Again very good because in India, we do not really have a pension product in that sense. The most important thing that we need to look at when there is a pension reform is taxation. Today what happens is when you have an insurance product, whether it is a pension built-in, there is return of capital. You put in let us say Rs 10 lakh today with an understanding that at sometime in future, you will get an annuity of X amount every month. The money that you are receiving every month from the insurance company, it is fully taxed in your hand. The money which you are receiving back has two elements, one is the interest element, which is when you have given that Rs 10 lakhs to the insurance company, you're earning interest, and the other is the return of principal. So when there is a return of principal, that really should not be subject to tax. So if you bring in the appropriate tax laws where the principal repayment is eliminated, then pension will be a brilliant product.